Immigration continues to be a pivotal topic in the United States, sparking debates that touch upon various fundamental aspects of American life. A significant, yet often overlooked, element is the financial contribution of undocumented immigrants through taxes. This analysis provides an in-depth examination of the federal, state, and local taxes paid by this population, offering a clearer understanding of their economic impact.
In 2022, undocumented immigrants in the U.S. paid an estimated $96.7 billion in federal, state, and local taxes. This figure breaks down to $59.4 billion contributed to the federal government and $37.3 billion to state and local governments. Considering that there were approximately 10.9 million undocumented immigrants residing in the U.S. in 2022, this averages to roughly $8,889 per person. For every 1 million undocumented immigrants, public services receive $8.9 billion in additional tax revenue.
A substantial portion of these tax dollars—over a third—funds programs that these immigrants cannot access. Specifically, undocumented immigrants paid $25.7 billion in Social Security taxes, $6.4 billion in Medicare taxes, and $1.8 billion in unemployment insurance taxes in 2022.
At the state and local levels, the majority (46 percent, or $15.1 billion) of tax payments come from sales and excise taxes on purchases. Property taxes, including those levied on homeowners and renters, account for 31 percent ($10.4 billion), while personal and business income taxes contribute 21 percent ($7.0 billion).
Six states receive more than $1 billion each in tax revenue from undocumented immigrants: California ($8.5 billion), Texas ($4.9 billion), New York ($3.1 billion), Florida ($1.8 billion), Illinois ($1.5 billion), and New Jersey ($1.3 billion).
Interestingly, in 40 states, undocumented immigrants pay higher state and local tax rates than the top 1 percent of households.
Income tax payments are often affected by laws that place undocumented immigrants at a disadvantage. They are frequently barred from receiving significant tax credits and may not claim refunds due to lack of awareness, concerns about immigration status, or limited access to tax preparation assistance.
Providing work authorization could significantly boost tax contributions, increasing their wages and improving tax compliance. This could raise tax contributions by $40.2 billion per year, totaling $136.9 billion. The federal government would receive the majority of this new revenue ($33.1 billion), while states and localities would receive the remaining ($7.1 billion).
Breakdown of Tax Contributions
To fully understand the tax burden, let’s dissect the types of taxes paid.
Federal Taxes
The federal government collects the bulk of its revenue through income taxes. Undocumented workers contribute substantially to programs like Social Security, Medicare, and Unemployment Insurance, despite being largely excluded from accessing these benefits.
| Tax Type | Revenue |
|---|---|
| Social Security Tax | $25.7 billion |
| Medicare Tax | $6.4 billion |
| Unemployment Insurance Tax | $1.8 billion |
| Sum of Social Insurance Taxes | $33.9 billion |
State and Local Taxes
State and local governments rely on a wider range of taxes, with nearly 39 percent of the total tax dollars paid by undocumented immigrants directed to these entities.
The majority of state and local tax payments occur through sales and excise taxes, followed by property taxes, and then personal and business income taxes.
| State | Current Contributions | Potential Contributions with Legal Status | Tax Change |
|---|---|---|---|
| Alabama | $146,000,000 | $180,000,000 | $34,000,000 |
| Alaska | $12,600,000 | $14,600,000 | $2,000,000 |
| Arizona | $704,000,000 | $813,500,000 | $109,500,000 |
| Arkansas | $188,200,000 | $223,200,000 | $35,000,000 |
| California | $8,470,100,000 | $10,314,700,000 | $1,844,600,000 |
Data for all states is available in the original article.
Disparities in the Tax Code
Undocumented immigrants often face a harsher tax code than legal residents. They contribute to programs from which they are excluded, and are ineligible for federal credits like the Earned Income Tax Credit (EITC) and may face restrictions on the Child Tax Credit (CTC). Some states have taken steps to offer inclusivity in state-level credits, but these policies are not universal.
The Impact of Work Authorization
The tax contributions of undocumented immigrants are lower than what they would be if they had legal status. Providing work authorization would not only increase income tax revenues through improved compliance but also raise wages, leading to higher taxable earnings, consumption, and property ownership.
Conclusion
Undocumented immigrants contribute significantly to the funding of public infrastructure, institutions, and services, paying $96.7 billion in taxes at the federal, state, and local levels in 2022. A large portion of this goes towards social insurance programs they are barred from accessing. These figures highlight the substantial implications of immigration policy choices for public revenue at all levels of government.
